Aetna's quarterly income drops

Published 1:00 am, Thursday, November 2, 2000

Net income for the quarter totaled $177.4 million, or $1.24 per share, down from $195.3 million, or $1.29 per share, in the same quarter last year.

Operating profit in the health care segment -- which Aetna plans to spin off to investors after selling its financial and international businesses to Dutch banking giant ING -- fell 41 percent from the year-ago quarter. For the quarter, the segment reported operating profit of $77 million, compared with $131.3 million in the same quarter last year.

Operating profits increased slightly in the financial services and international segments and were essentially steady in the large case pension segments.

Aetna said the disparity between medical costs and revenues decreased in its Aetna U.S Healthcare business but worsened in its Prudential HealthCare operations.

"While we are disappointed with these results, we have identified a subset of geographic markets and large accounts that represent the bulk of the worsening experience and we are taking a number of corrective actions," Aetna Chairman William H. Donaldson said.

Those steps include leaving roughly half of the Medicare markets Aetna now serves and eliminating or selling products that are not meeting profit targets. The company is also continuing a cost-cutting program.

Details of that cost-cutting plan are being developed now, said Aetna spokeswoman Joyce Oberdorf, and there's no word on whether it will include layoffs.

"The revenue base of the company will be smaller going forward and the expense base needs to be reflective of that," Oberdorf said.

While the earnings are clearly depressed, said Weston Hicks, an analyst with J.P. Morgan in New York, "the market has grossly overreacted" to Aetna's earnings problem.

Aetna agreed in July to sell its financial and overseas operations to ING for $7.7 billion. The deal leaves Aetna free to concentrate on improving its health care business, which has not met profit expectations.

For the first nine months of this year Aetna earned $533.2 million, or $3.73 per share, down from $582.4 million, or $3.81 per share, in the year-ago period.

Aetna has 19.2 million health insurance customers, some 14.5 million dental insurance customers and 11.4 million group insurance customers.